Bank of Thailand: Rising Household Debt a Concern

BANGKOK—Thailand’s government has launched a slew of programs over the past couple of years to drive up consumer spending and propel the country through the global economic slump.

But as the government encourages shoppers with the likes of tax rebates for first-time buyers of cars and houses and a multibillion-dollar subsidy for rice farmers to boost rural incomes, the country’s central bank chief is warning about debt.

About 40% of the total household credit was issued by commercial banks, while 30% was issued by government financial institutions, such as the Government Housing Bank and the Bank for Agriculture and Agricultural Cooperatives.

Mr. Prasarn cited government stimulus programs, such as the auto-buyer incentives, as a factor in credit growth. About 1.2 million vehicles were sold under the first-car tax-rebate program, introduced by Prime Minister Yingluck Shinawatra last year to boost domestic spending after widespread flooding devastated the country’s economy in 2011.

Many of the stimulus measures are similar to those championed by Ms. Yingluck’s older brother, Thaksin Shinawatra, whose aggressively pro-growth policies as prime minister became known as “Thaksinomics” before he was ousted in a military coup in 2006.

But now the Thai economy is beginning to slow. Seasonally adjusted, first-quarter GDP was down 2.2% from the previous quarter as headwinds from China and elsewhere began to affect exports and consumer confidence. A Thai government economic-planning agency recently reduced its growth forecast for the year to between 4.2% and 5.2% from between 4.5% and 5.5%.

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A Bangkok car dealership in April, enjoying the boost in demand created by the government’s buying incentive.

With the global outlook still uncertain, Mr. Prasarn said he is worried about the ability of lower-income Thais to repay debts, and about the effect of that debt burden on future consumer spending.

He said the central bank is keeping a close eye on the situation before introducing any regulatory measures to tamp down borrowing. “We don’t want to overreact,” Mr. Prasarn said.

In the meantime, the Bank of Thailand is reaching out to commercial banks to ease back on advertising for personal loans and urging Thais to be more prudent in their financial planning.

Wilawan Watcharasakwet and Nopparat Chaichalearmmongkol contributed to this post.

CorrectionSeasonally adjusted, Thailand’s first-quarter GDP was down 2.2% from the previous quarter. An earlier version of this post incorrectly said it was down 2.2% from a year earlier.

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